Chennai , 27 Jul 2007

2007- 08 Quarter 1 Financial Results

TVS Motor Company reported total revenue of Rs. 801.56 crores for the quarter ended June 2007 compared to Rs. 939.62 crores recorded during corresponding quarter of the previous year.

Profit before tax during the quarter ended June 2007 stood at Rs. 10.90 crores as against Rs. 30.14 crores recorded in the corresponding period last year. Profit after tax stood at 7.55 crores as against Rs. 21.26 crores recorded last year.

During the quarter ended June 2007, the overall two-wheeler recorded a sale of 320,178 units compared to 376,297 units recorded corresponding period last year.

Motorcycle sales were lower at 150,487 units compared to 233,614 units over the previous period. The decline in motorcycle sales was mainly due to the industry slowdown witnessed by the motorcycle segment due to reduced availability of finance, increased cost and stringent norms being followed by retail financiers. Currently, more than 60 per cent of the purchases of the two wheelers are dependent on retail finance. Consequently, the company is consciously reducing the stock of motorcycles held by the trade to keep the stocks under control.

Further, the profits were lower due to high cost of raw materials especially steel, aluminum, rubber, copper, polymers etc. This impacted the margins of the company substantially. The cost of raw materials during the quarter was 74.3% of the revenue compared to 72.2 % of the revenue recorded in the same period last year. During this period, the company continued to invest behind brands as a part of strategic brand building exercise

The interest costs for the quarter was higher due to increased level of borrowing for the new projects as well as higher cost of borrowings for working capital.

The company will soon launch two new motorcycles in the executive segment, which will set a new benchmark in the industry in terms of technology, performance and style.

In addition, the company will also launch an upgrade of TVS StaR, which will provide superb value to its customers in the economy segment.

The launch of these products will be around the forthcoming festival season. With these three launches and the existing Apache RTR 160, the company will have significant presence in all the three key segments of motorcycles, namely the economy, executive and premium segments.

PT TVS Motor Company Indonesia, wholly owned subsidiary of TVS Motor Company, commenced its operation with the inauguration of its plant at Karawang Indonesia on July 16th 2007 by the President of Indonesia, Mr. Susilo Bambang Yudhoyono. The factory, located in 20 hectares of land with complete manufacturing facilities, will produce TVS Neo, the new generation of bebeks for the Indonesian market. With a capacity of 300,000 units per year, the company will soon launch other variants and models.

During the quarter, the Company's Himachal Pradesh Manufacturing plant was formally opened on April 29th 2007. This state of the art facility is located at Nalagarh, Solan district in Himachal Pradesh and is designed to support the production of the company's world-class two-wheelers. TVS Motor Company will have reduced cost of transportation of vehicles, as this facility will cater to all the states in northern India, and parts of central India. This will also help the company to improve their delivery time to the vast dealer network already established in these areas and help the company increase sales.

The three-wheeler project is on schedule and will have a capacity of 90,000 units per annum. The first three-wheeler product will be launched by October 2007.
The company has taken up the above three large projects. Of these, two projects have already gone into production and the remaining three-wheeler project is expected to commence production shortly. Once these projects achieve full production levels and stabilize their operations, they will contribute significantly to the overall turnover and profits of the company.

The company continues to undertake several cost saving measures like value engineering, process improvement etc. TPM is practiced in all the plants to ensure significant improvement in productivity leading to reduction in manufacturing cost.

The company believes that the pressure on the margin will continue in the first half of 2007-08 due to high cost of raw material and intense competitive activity. However, in the second half of the year, the company expects the pressure on margin to ease with the launch of new products and the other initiatives mentioned above.

During quarter 1, towards end of June 2007, the company launched an upgrade of Apache, a 160 cc motorcycle with 15.2 bhp. This high performance motorcycle is targeted at the youth looking for both style as well as latest features, normally seen on international high-end motorcycles. The bike has received favourable response among the customers as well as leading experts from the automobile magazines.

During quarter 1 ended June 2007, the company's unique offering to its Scooty customers with a wide choice of 99 colours was launched in 37 towns across the countries and will soon be expanded to more cities. This is the first time in the world that an Automobile company offers such huge range of customized colours for its product to choose from. The Scooty brand continues to maintain leadership in the sub 100 cc scooter segment.

During the quarter one ended June 2007, the company exported 26,213 two wheelers and exports will continue to be a focus area for the company.